When it comes to economics the one single issue that seems to get everyone in a room in agreement is that GDP is trash. Here is a transcript from a typical conversation between me and an individual who hears I’m an economist:
Individual: “You are an economist! You must agree that GDP is crap.”
Nolan: “Ahh well, ummm, what question are you asking?”
Individual: “What, it is just crap though, you must agree that it is rubbish”
Nolan: “Well it depends on your question, why are we measur …”
Individual: “Come on, it is just rubbish, everyone agrees it is rubbish. I mean we care about so many other things”
Nolan: “Ahh so your question is about what we should value. Ok yeah it doesn’t measure all social value but …”
Individual: “Yeah, it’s rubbish, exactly”
I don’t have enough fingers and toes to count the number of times I’ve had this conversation – but in truth GDP is really good at measuring what it is supposed to measure … the problem is that people keep using it as a measure of something else.
But it is hardly the individual’s fault that they have come to this conclusion. Decades of GDP fetishisation by policy makers combined with economists who spend more time talking about (and in the extreme teaching) the shortcomings of GDP than actually teaching what GDP is supposed to measure has provided this great rule of thumb that people follow to understand what is going on.
So in this post let me do something novel – let me stand up for GDP.